Daily Research Updates
Morning Briefings
Expert market analysis delivered every morning. Stay informed with comprehensive research and data-driven insights.
On Technology, Semiconductors & Fusion
Yes, there’s some froth in this bull market. A few companies have ditched their traditional businesses to jump into AI-related areas. And the market’s performance has certainly narrowed. But the S&P 500 Information Technology sector’s earnings forecast for both this year and next should provide the support this market needs to continue moving higher. … Jackie also looks at the S&P 500 Semiconductors industry, one of the strongest within the Technology sector. Charts of the industry’s amazingly strong earnings and wide margins illustrate why shares have rallied so sharply. … Finally, with the world facing an oil shock, we take a look at some of the recent advancements in fusion energy. Could fusion reactors come online in the next five or so years to solve many of our energy problems?
On Booming Earnings, European Politics & Dangerous AI
The stock market’s meltup has been led by an earnings boom. Joe goes through the numbers and finds that the boom is widespread. … European politics are moving to the right as voters express their discontent about unchecked immigration. William explains that the right is likely to push for tax cuts without also reducing spending, resulting in bigger government deficits. That’s one reason why bond yields are rising in Europe. … Melissa examines the potential dark side of AI.
POTUS Goes To China
What will be the likely outcome of the Beijing summit between Trump and Xi? William considers the possibility that the one-year “détente” agreement between China and the US, signed in October 2025, will be extended. Both sides could use some trade deals. The big question is whether China will lean on Tehran to accept US terms for ending the war. … Our “house” position is that China’s stock market is appropriate for traders, not investors. Toby sees upside in China’s tech stocks if Xi convinces Trump to allow more US semiconductor exports to China. … William updates on developments in Japan that might impact the carry trade.
Sweet Spot For The Labor Market
April’s employment report had lots of good news for the labor market. Ed & Elias discuss some of the news that seemed to be bad but really wasn’t on closer inspection. In their view, the April jobs report amounts to a vote of confidence in the narrative that the labor market is stabilizing and may even be improving without boosting inflation. Meanwhile, retiring Baby Boomers are weighing on wages, payroll employment, disposable income, and the personal saving rate. But they are boosting consumer spending by spending their substantial net worth. … Incoming Fed chair, Kevin Warsh is likely to find that the majority of his FOMC colleagues will want to eliminate the easing bias in the committee's next statement. … Dr. Ed reviews Remarkably Bright Creatures (+ +).
The War’s Supply Shocks
Our friends at Capital Alpha released a great summary of the impact of the war in the Middle East on the availability of key commodities that are produced in the region and transported through the Strait of Hormuz. Even if the war ends soon, the ripple effects will continue to be felt around the world through the end of this year and perhaps next year too. … William focuses on the war’s impact on global food supplies.
On Magnificent US Earnings, AI’s Impact On Jobs & UK’s Woes
“Truly magnificent!” are Joe’s words for the collective March-quarter earnings strength of the S&P 500 companies that have reported results so far. He shares his takeaways from the data. … Also: Melissa scours employment data to learn how much creative destruction AI has wrought so far. Over time, we think AI will create as many jobs as it destroys. … And: Political instability in the UK has driven 10-year gilt yields to highs not seen since the 2008 financial crisis. What’s spooking bond investors, explains William, is the prospect of a less fiscally responsible prime minister if Keir Starmer steps down. Another big uncertainty is whether the BOE will tighten monetary policy to quell higher inflation.
The War's Impact On Emerging Markets
Among the many economic ripple effects from the war in Iran, the inflation-economic growth balances in developing market economies have been upended. Currencies are plummeting relative to the dollar. William examines economies affected the worst including net energy importers India and Indonesia as well as Japan, where the yen-carry-trade risk has returned. … As net exporters of commodities, Latin American economies are faring much better. Toby sees opportunities for investors in Latin American stocks, particularly those of Brazil and Mexico.
Consumers Still Doing What They Do Best
Consumer spending is the single biggest driver of US GDP growth, and its remarkable resilience despite lackluster income growth contributes mightily to the resilience of the US economy broadly. Today, Ed and Elias explain why consumer spending has seemed to defy economic gravity and why it should continue to do so. The short answer: our “gen-shaped economy,” shaped by generational dynamics as the Baby Boomers move through life’s phases. As retired Boomers chip away at their massive nest eggs while not earning a paycheck, they’re keeping consumption aloft and the saving rate falling. … Also: Three other consumption tailwinds are worth noting. So is one potential risk to our optimistic spending outlook: a prolonged period of triple-digit oil prices. … And: Dr Ed reviews “Mr. Burton” (+ +).
On Consumer Spending, Rental Markets & Crypto
Consumer spending doesn’t seem to have let up despite higher gas prices and greater geopolitical uncertainty stemming from the war in the Middle East. That’s the view from the vantage points of both Hilton and Visa execs, Jackie reports. Both companies had strong March quarters and are optimistic about the remainder of 2026. … Also: A post-pandemic apartment construction boom oversupplied the market, and rent inflation has decelerated significantly as a result. But much slower new supply growth going forward should firm the market, says AvalonBay. … And: The line is blurring between banks and cryptocurrency companies, each expanding into products and services traditionally offered by the other.
On the Nikkei’s Ascent, Europe’s Energy Crisis & Great US Earnings
Japan’s Nikkei index has soared to a record high in defiance of economic reality. Stagflation looms, and the government has no economic rescue plan. William discusses the reasons for the decoupling of the stock market from economic fundamentals and shares measures the prime minister could take to keep the bulls running. … Also: The closure of the Strait of Hormuz puts European economies in harm’s way. Melissa examines the Eurozone’s exposure to energy imports from the Middle East and the stagflationary implications of the energy-supply shock. … And: Joe reports cheery stats from the 30% of S&P 500 companies that have reported Q1 earnings so far.
Eurozone Facing Tough Times Again
The European Central Bank faces a tough decision when it meets this week. Tightening to tamp down rising inflation from the energy shock of the Middle East war is riskier now that the recent PMI release indicates contraction, William explains. The unexpected weakness brings the specter of stagflation, squelching the economic optimism that prevailed prior to the war. … Also: The German economy, the Eurozone’s anchor, hasn’t been this weak since the Covid period. Officials warn of long-term pain. … And Toby traces the Europe MSCI’s comparatively poor earnings and productivity growth to Europe’s lack of AI powerhouses and other technology innovators, with the exception of ASML and SAP.
The Oil Shock & Inflation
Why hasn’t the price of Brent crude oil gone through the roof despite the closure of the Strait of Hormuz since February 28? Ed and Elias explain the anomalous price action. … Also: Why US oil producers aren’t pumped enough by higher energy prices to save the day. … And: How the energy supply crisis is likely to feed into inflation, not just via higher gasoline and fuel prices but higher food prices as well given constrained fertilizer supplies. Nevertheless, disinflationary wage and rent forces should prevail once inflationary pressures dissipate in coming months. … Finally, how the Fed is likely to react to higher inflation data near term. … Also: Dr Ed reviews “Michael” (+ +).
Data Centers Unplugged & RTX During Wartime
Data centers are notorious gluttons for electricity and water, but not punishment. More and more are employing novel ways to address the outrage targeted at them by environmentalists and local communities, Jackie reports. … Also: One innovative company has a sea change in mind for data centers. Panthalassa has developed a combination hydroelectric plant/data center that bobs unanchored in the ocean waves—no land, no grid, no complaints. … And: With bloated backlogs and earnings flying high, RTX is one company benefiting from the war.
On 100% Depreciation, Rising Earnings & China’s Woes
How much has the OBBBA’s 100% capex depreciation provision boosted companies’ capital expenditures? Melissa has scoured the available data sources to learn, “not much.” On a macro level, business investment hasn’t risen enough to suggest a policy-driven catalyst. Few small businesses credit the OBBBA with affecting their spending plans. And depreciation in and of itself is an earnings headwind for the formerly asset-lite Mag-7, given all their AI-related spending. … Also, Joe reports that analysts have been raising their Q2-2026 estimates during the Q1 reporting season instead of the more typical reverse. … And: William counters the bullish view that China’s economy will weather the war just fine.
Three Tech-Led Economies In Geopolitical Crosshairs
Today, William examines the prospects of three similarly challenged emerging economies: South Korea, Taiwan, and Israel. All three are high-tech-focused, export-dependent economies riding the AI wave, yet located in geopolitical hot spots. If the war in the Arabian Gulf escalates, they face risks including rising risk premia, falling asset valuations, and capital outflows. But opportunities abound as well. … Also: Toby discusses the valuations and fundamental underpinnings of the three nations’ stock markets. Korea’s looks cheap given an explosive earnings growth outlook, Taiwan’s appears fairly priced, and Israel’s seems overvalued relative to fundamentals.
Debating Warsh
Kevin Warsh, the probable next Fed chair, wants to lower the federal funds rate sooner rather than later. Few FOMC members agree with him. Ed and Elias don’t either. Today, they explain why Warsh’s case for lower rates is fundamentally flawed. It rests on the economic dogma that, because the labor share of National Income is declining amid an AI-fueled productivity boom, the theoretical neutral federal funds rate, R*, is also declining. On the contrary, explain Ed and Elias, the productivity boom raises R* for reasons unique to the current economic backdrop. That leaves little room for the aggressive rate cuts Warsh envisions without risking speculative bubbles and a financial crisis. Also, the Bond Vigilantes would probably resist Fed easing, as they have since 2024. … Ed reviews “Anniversary” (++).
Oil, Financials & Slop
Equity investors, optimistic that the end of the Iran war is near, drove the S&P 500 to a record closing high yesterday. If only such optimism were reflected in oil prices. Jackie discusses the developments and expectations moving the two markets. … Also: The S&P Financials sector posted excellent Q1 results, but its ytd performance lags all other sectors’. Investors might be overlooking some tailwinds and overreacting to some headwinds. … And: Video disruptor YouTube is being disrupted by “AI slop” on its channels. So are its social media video platform peers. But prohibiting AI-generated content comes with a cost.
On IMF’s War Scenarios, China’s EVs & US Earnings Revisions
The IMF’s just released World Economic Outlook analyzes the impacts of war on economies based on decades of data. Melissa has mined its findings for insights to investors trying to see through the fog of war. Chief among them: The hit to US GDP growth may be negligible. … Also: William discusses the sales windfall Chinese EV makers are enjoying as a result of the energy shock. … And: Joe’s analysis of analysts’ net earnings revisions reveals that S&P 500 sectors tied to the recently outperforming Magnificent-7 have been the target of estimate cutting, while the reverse is the case for the long-time lagging sectors.
On Central Banks In Wartime
The economic trajectories that global central bankers had thought their countries were on before the Iran war started have been upended by disrupted supply chains, altered trade relationships, spiking inflation, and impaired growth prospects. When the war and the discombobulation it’s causing will end is anyone’s guess. William describes the decisions facing the Fed and its counterparts in Europe, Japan, England, and China as they attempt to steer their economies in the dark. … Also: Toby discusses the yen’s weakness, which displeases President Trump and complicates the BOJ’s path forward.
On US Profits, Consumers & Inflation
With the US economy producing record-breaking earnings and margins, Dr Ed and Elias wouldn’t be surprised to see employment pick up despite AI adoption and other factors holding it back. … They also expect consumer spending to remain resiliently robust even though income growth isn’t keeping up, which is depressing the saving rate. But not even a negative saving rate—which may occur—would tank consumer spending in today’s environment, they maintain. The spending of retired Baby Boomers would keep it afloat. … Also: CPI inflation historically runs higher than PCED inflation; lately, the reverse is true. That’s mostly because rent inflation, which is moderating rapidly, carries more weight in the CPI.
On Health Care, Energy Inflation & Small Nuclear Reactors
The S&P 500 Health Care sector is showing signs of a rebound following a period of significant underperformance. Jackie examines the recent surge of large drug companies buying biotech upstarts and the surprise increase in Medicare reimbursement rates for 2027. ... The cease-fire between the US and Iran sent the price of Brent crude oil futures tumbling 15%, providing some much-needed relief for airlines and shippers which have been aggressively passing higher fuel costs to consumers. ... Meanwhile, the race to build AI data centers is accelerating interest in Small Modular Reactors despite one project cancellation and pending regulatory approvals. We look at some of the major projects being planned across the country by X-Energy Reactor, NuScale Power, Oklo, TerraPower, and Holtec International.
The Impact Of The Oil Shock On Germany, Canada, And India
The global economy is currently grappling with a "polycrisis" driven by the war in Iran and the closure of the Strait of Hormuz, which has triggered a massive energy price shock and forced central banks into a "stagflation" trap. William and Toby team up to review the situation in Germany, Canada, and India. …In Europe, the ECB is pivoting toward aggressive tightening as German inflation spiked to 2.8% in March, threatening to push the 10-year Bund yield higher. Canada is facing a similar dilemma; while elevated oil prices at $110 per barrel theoretically benefit the net exporter, the immediate reality for Prime Minister Mark Carney and BoC Governor Tiff Macklem is a contracting services sector, a 6.7% unemployment rate, and a "wholesale repricing" of inflation forecasts that has moved the BoC toward potential rate hikes. …Meanwhile, India’s "Goldilocks" narrative is unraveling as the rupee slides toward a psychologically fraught 100 level, exacerbated by a $12 billion equity outflow in March and a 13% ytd drop in the Sensex, signaling that the structural failures in manufacturing and chronic deficits have left the economy uniquely vulnerable to this global risk-off pivot.
Anatomy Of The US Labor Market
Last week’s employment report was widely interpreted as good because jobs growth rebounded and the unemployment rate dropped. Dr Ed and Elias disagree. Our inflation-adjusted Earned Income Proxy fell as inflation surged, a bad sign for real disposable income. The drop in the unemployment rate is good news, of course. Both labor supply and labor demand have contracted in recent months but remain roughly in balance. … Also noteworthy: Retiring Baby Boomers are weighing on real disposable income while simultaneously bolstering consumer spending. … And: Dr Ed reviews “Project Hail Mary” (+).
On Aluminum, P/Es & Semis
The Iran war has tightened the market for aluminum, driving up prices and benefitting US producers. Jackie looks at the market dynamics and what Alcoa execs had to say about the unexpected demand they’re seeing. … Alcoa is also building a gallium plant for the US, Australian, and Japanese governments to ensure ample supplies of the metal used in electronics and produced mostly by China. … Also: Some S&P 500 sectors and industries have enjoyed rising valuations over the past year; we list some of the biggest winners. … And in our Disruptive Technologies segment, three announcements could dramatically alter demand and supply in the semiconductor industry.
On Private Credit, Brazil, And Earnings
The private-credit market is inherently illiquid. Recently, it has needed to gate redemptions, making investors who want access to their funds wait. Vocal retail investors have reporters questioning whether this could trigger a 2008-style financial crisis. That’s not happening, Melissa explains. But she outlines two contagion-transmission paths that bear watching during these uncertain times. … Also: William takes us to Brazil, where the uncertain outcome of a close presidential race will keep investors in limbo for months. Meanwhile, prioritizing Brazilian stocks over bonds might be wise. … And: Joe expects S&P 500 companies’ collective Q1 earnings growth to beat even the 14% analysts project.